I began analyzing the financial markets in 1982 when I became the research director for a financial advisory firm and provided regular market analysis on stocks, commodities, currencies and mutual funds. I am a technical analyst. Much of my focus was on how obscure technical indicators or methods, could be applied to the financial markets and used as an effective trading tool. Many of the indicators I have used for years, such as Gerry Appell's MACD and Welles Wilder's RSI, have subsequently gained wide popularity.

This page is devoted to sharing my insights and techniques in order to help you become a smarter trader/investor. Over the past twenty years I have traveled around the world several times, visiting all of the major financial centers as he taught professional traders and money managers my approach to the financial markets.

My method of stock selection starts with a proprietary scanning method to select a group of individual stocks for more extensive analysis. This includes an in-depth study of the volume patterns that I use to determine the strength of a stock's trend. Those with the strongest trend, either up or down, are then further analyzed to determine entry, exit and risk levels. I use Fibonacci retracement, projection and extension analysis to determine both profit objectives as well as stops.

Big Volume Bombs

The old saying “a rising tide lifts all boats” doesn’t always apply to the stock market, and MoneyShow’s Tom Aspray examines the charts of four stocks that have sold off heavily despite the market grinding ever higher.

The major US averages had a choppy session Wednesday as after making new highs early in the session they moved in and out of positive territory. The A/D ratios did close positive with the Nasdaq 100 and Dow Transportation Averages showing the best gains as they were up 0.40% and 0.38% respectively.

The European markets are seeing heavier selling early Thursday with the German Dax Index down 1.3% in early trading. This is consistent with the negative technical readings that I discussed in Tuesday’s column.

The stock index are also down significantly in early trading ahead of the jobless claims. A daily close in the Spyder Trust (SPY) below $151 should signal a decline to the more widely watched chart support in the $149-$149.80 area. This could be the start of the February Surprise and watching how the market acts at stronger support should provide more insight.

As stocks have pushed to the upside, several stocks have seen very heavy selling and they have some common technical characteristics which helped warn in advance of their declines. Let’s look at three of these recent disasters and one stock that may be ready to drop sharply.

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Chart Analysis:Cliff Natural Resources (CLF) not only reported very weak earnings but also reduced its dividend by 76%. The stock dropped almost 20% on five times the average volume.

This was consistent with the negative weekly and daily technical outlook discussed in 3 High-Yield Disasters last September.

The weekly chart shows that a head and shoulder top was completed in May when CLF closed below the neckline (line a).

Once below the late 2012 low at $28.33, the next long-term support is in the $23.30-$25 area.

The weekly relative performance broke its uptrend (line b) in September 2011 and then rebounded back to its declining WMA.

This was the start of a long-term downtrend and the RS line has made lower lows, line c.

The daily OBV briefly surpassed its resistance, line g, in early February and in four days was back below its WMA.

The first strong resistance is well above current levels at $24.50-$25.50.

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Dr. Pepper Snapple Group Inc. (DPS) met its revenue estimates but missed on its EPS and the market was unforgiving as it gapped lower and dropped 5.8% on over six times the average volume.

The down gap through the daily uptrend, line a, took DPS also below the November lows at $42.53.

The major 38.2% Fibonacci support from the 2011 low at $34.33 is at $41.77 with the 50% support at $40.35.

The uptrend in the relative performance, line b, was broken on January 11 and support (line c) was broken six days later.

The weekly RS line (not shown) dropped below its WMA in early January.

The OBV dropped below its WMA on Tuesday, just one day before prices plunged.

There is initial resistance now at $43.56-$44.12.

PVH Corp. (PVH) is a textile company that produces apparel and owns well-known brands like Tommy Hilfiger and Calvin Klein. They just completed their acquisition of Warnaco (WRC) on Wednesday and they report earnings on March 22.

The stock closed slightly lower on Wednesday but the volume at over 17 million was much greater than the daily average of 1.1 million shares.

The short-term daily uptrend, line e, is now at $117 with 38.2% Fibonacci support at $111.51.

There is stronger support from last fall in the $107 area, which corresponds to the 50% support.

The daily relative performance has formed lower highs since December, line f.

A drop in the RS below support at line g would be more negative.

The daily OBV also did not confirm the highs in 2013, line h, and has been below its WMA since January 30.

There is resistance now at $122.46 to $124.53.

What it Means: The action in three of these stocks reinforces that one cannot be complacent with any of their holdings. In all instances, either both or one of the RS and/or OBV studies were negative prior to the drop in their stock price. All three are likely to decline further especially in a weak market.

Income investors need to pay attention to the technical outlook. As I mentioned last fall “I would encourage income investors to at least take a look at the weekly charts of any income stock they are looking to buy. Those who want to go a bit further should also look at the RS and OBV analysis to see if they are supporting the decision to buy.”

The action of PVH Corp. (PVH) looks quite ominous and holders of the stock should either get out now or monitor their positions closely.

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